Section 1. SHORT TITLE.--This act may be cited as the
"Mortgage Fair Foreclosure Act".

Section 2. LEGISLATIVE FINDINGS.--The legislature finds
it to be the public policy of New Mexico that homeowners should
be given reasonable notice of the fact of and basis for an
alleged default on their mortgage and the opportunity to pay
their home mortgages if they are deficient, and that lenders
will be benefitted when residential mortgage debtors cure their
defaults and return defaulted residential mortgage loans to
performing status.

Section 3. DEFINITIONS.--As used in the Mortgage Fair
Foreclosure Act:

A. "debtor" means a natural person shown on the
record of a mortgage lender as being obligated to pay the
obligation secured by that mortgage;

B. "lender" means a person that makes or holds a
residential mortgage and a person to which a mortgage is
assigned, but does not include the seller in a real estate
sales contract that is otherwise binding under New Mexico law;

C. "loss mitigation" means any process designed to
explore and pursue alternatives to foreclosure;

D. "mortgage" means a mortgage, security interest,
deed of trust or the like, but not a real estate sales contract
that is otherwise binding under New Mexico law, in which the
security is a residential property in New Mexico such as a
house, real property or condominium that is occupied, or is to
be occupied, by the debtor, who is a natural person, or a
member of the debtor's immediate family, as that person's
residence; and

E. "servicer" means a person that, whether for
compensation or gain from another or on its own behalf, engages
in the business of receiving any scheduled periodic payments
from a debtor pursuant to the terms of any mortgage loan,
including amounts for escrow accounts, and making the payments
of principal and interest and such other payments with respect
to the amounts received from the debtor as may be required
pursuant to the mortgage loan, the mortgage servicing loan
documents or the servicing contract with a lender.

Section 4. APPLICABILITY.--The Mortgage Fair Foreclosure
Act applies to all mortgages wherever made that have as their
security such a residence in New Mexico, provided that the real
property that is the subject of the mortgage shall not have
more than four dwelling units, one of which shall be, or is
planned to be, occupied by the debtor or a member of the
debtor's immediate family as the debtor's or family member's
residence at the time the mortgage is executed.

Section 5. WRITTEN NOTICE OF INTENT TO ACCELERATE LOAN OR
FORECLOSE.--

A. Upon a failure to perform any obligation of a
mortgage by a debtor and before any lender or servicer may
accelerate the maturity of a mortgage obligation and commence a
foreclosure or other legal action to take possession of the
property that is the subject of the mortgage, the lender or
servicer shall give the debtor written notice of such intention
at least thirty days in advance of such action.

B. Notice of intent to accelerate the maturity of a
mortgage obligation, commence a foreclosure or take any other
legal action to take possession of the property that is the
subject of the mortgage shall be in writing, and either served
personally on the debtor or sent to the debtor by registered or
certified United States mail, postage prepaid and return
receipt requested, at the debtor's last known address, and if
different, to the address of the property that is the subject
of the mortgage. If notice is accomplished by mail, notice
shall also be sent to any alternative address that the debtor
has provided to the lender or servicer. The notice is deemed
to have been effectuated on the date the notice is served
personally on the debtor or seven days following the date of
the notice.

C. The written notice required pursuant to
Subsection A of this section shall be printed in at least
twelve-point font, be printed in English and Spanish and
identify that the notice is being sent pursuant to the
requirements set forth in this section. The written notice
shall clearly and conspicuously state in a manner reasonably
calculated to apprise the debtor of the following:

(1) the property that is the subject of the
security instrument being foreclosed upon, the particular
obligation or real estate security interest being foreclosed
upon and the parties to any such obligation or interest;(2) the nature of the default claimed;

(3) the right of the debtor to cure the
default as provided in Section 7 of the Mortgage Fair
Foreclosure Act;

(4) what performance, including the sum of
money, if any, required to cure the default as of the date
specified pursuant to Paragraph (6) of this subsection;

(5) the allocation of money due and owing to
principal, interest, fees and any other applicable allocation,
including a projection of the change in money due as a result
of daily accrual during the thirty-day period set forth in
Paragraph (6) of this subsection;

(6) the date by which the debtor shall cure
the default to avoid initiation of foreclosure proceedings or
the initiation of any other legal action to take possession of
the residential property that is the subject of the mortgage,
which date shall not be less than thirty days after the notice
is effectuated, and the name, address and telephone number of a
person to whom the payment or tender shall be made;

(7) the lender's right to take steps to
terminate the debtor's ownership in the property by commencing
a foreclosure suit in a court of competent jurisdiction, or by
taking other legal action to take possession of the residential
property that is the subject of the mortgage, if the debtor
does not cure the default by the date specified pursuant to
Paragraph (6) of this subsection;

(8) the right, if any, of the debtor to
transfer the real property that is the subject of the mortgage
to another person, subject to the security interest, which
transferee shall have the right to cure the default as provided
in the Mortgage Fair Foreclosure Act, subject to the mortgage
documents;

(9) the debtor's right to seek counsel from an
attorney of the debtor's own choosing concerning the debtor's
mortgage default, and that, if the debtor is unable to obtain
an attorney, the debtor may contact the New Mexico bar
association or lawyer referral services in the county in which
the real property securing the mortgage loan is located, and
that if the debtor is unable to afford an attorney, the debtor
may contact the legal services programs in the county in which
the property is located;

(10) a listing of any loss mitigation
counselors certified by the federal department of housing and
urban development located in New Mexico to discuss feasible
loss mitigation options;

(11) the name and address of the lender and
the telephone number of a representative of the lender whom the
debtor may contact if the debtor disagrees with the assertion
that a default has occurred or the accuracy of the calculation
of the action or amount required to cure the default;

(12) the name, address and telephone number of
a person with the authority to modify or otherwise affect the
debtor's obligation under the subject security interest; and

(13) the debtor's right to redeem a foreclosed
mortgage obligation.

D. The notice of intent to foreclose required to be
provided pursuant to this section shall not be required if the
debtor has voluntarily surrendered in writing the real property
that is the subject of the mortgage that is in default.

E. The duty of the lender pursuant to this section
to serve notice of intent to foreclose is independent of any
other duty to give notice pursuant to common law, principles of
equity, state or federal statute, rule of court or any other
right or remedy the lender may have as a result of the failure
of a lender to give such notice.

F. Compliance with this section shall be set forth
in the pleadings of any legal action referred to in this
section. If the plaintiff in any complaint seeking foreclosure
of a mortgage alleges that the property subject to the mortgage
has been abandoned or voluntarily surrendered, the plaintiff
shall plead the specific facts upon which this allegation is
based.

Section 6. ACCOUNTING.--In conjunction with the notice
required pursuant to Subsection C of Section 5 of the Mortgage
Fair Foreclosure Act, the lender shall also provide the debtor
with an accounting of the loan obligation covering the
twelve-month period prior to the date of the alleged default.
The lender shall certify that the information contained in the
accounting is true and accurate to the best of its knowledge.
The accounting shall include, at a minimum, a history of all
payments made during the eighteen-month period prior to the
date of the alleged default and the lender's or servicer's
allocation of those payments to principal, interest and any
applicable fees.

Section 7. RIGHT TO CURE DEFAULT--PROCEDURE.--

A. Notwithstanding the provisions of any other law
to the contrary, as to any residential mortgage for which a
notice of intent to foreclose is required pursuant to Section 5
of the Mortgage Fair Foreclosure Act, whether or not such
required notice was in fact given, the debtor or anyone
authorized to act on the debtor's behalf shall have the right
at any time, up to the entry of final judgment by the court, to
cure the default or reinstate the mortgage by tendering the
amount or performance specified in Subsection B of this
section. The payment or tender shall be made to the person
designated in the notice pursuant to Paragraph (6) of
Subsection C of Section 5 of the Mortgage Fair Foreclosure Act.

The debtor may exercise the right to cure a default as to a
particular mortgage and reinstate the mortgage only once in a
one-hundred-eighty-day period; provided, however, that this
limitation shall not apply if the mortgage debtor cures a
default by the date specified in Paragraph (6) of Subsection C
of Section 5 of the Mortgage Fair Foreclosure Act. The one-hundred-eighty-day time period shall run from the date of cure
and reinstatement.

B. To cure a default pursuant to this section, a
debtor shall:

(1) pay or tender to the person identified
pursuant to Paragraph (6) of Subsection C of Section 5 of the
Mortgage Fair Foreclosure Act, in the form of cash, cashier's
check or certified check, all sums due and owing;

(2) perform any other obligation that the
debtor would have been bound to perform in the absence of the
default or the exercise of an acceleration clause, if any; and

(3) pay all contractual late charges, as
provided for in the mortgage or other security instrument.

C. To cure a default pursuant to this section, a
debtor shall not be required to pay any charge, fee or penalty
attributable to the exercise of the right to cure a default as
provided for in the Mortgage Fair Foreclosure Act.

D. Cure of a default reinstates the debtor to the
same position as if the default had not occurred. It
nullifies, as of the date of cure, any acceleration of any
obligation under the mortgage or other security instrument
arising from the default.

E. If a default is cured after the filing of a
foreclosure action, the lender shall give written notice of the
cure to the court. Upon such notice, the court shall dismiss
the action without prejudice.

F. The right to cure a default pursuant to this
section is independent of any right of redemption or any other
right or remedy pursuant to common law, principles of equity,
state or federal statute or rule of court.

Section 8. PRE-LITIGATION OBLIGATIONS.--

A. Notwithstanding the provisions of any law to the
contrary, with respect to a residential mortgage for which a
notice of intent to foreclose is required pursuant to Section 5
of the Mortgage Fair Foreclosure Act, a person with authority
to modify or otherwise affect the debtor's obligation pursuant
to the subject security interest identified pursuant to
Paragraph (12) of Subsection C of Section 5 of the Mortgage
Fair Foreclosure Act shall be required to participate in good
faith in loss mitigation with the debtor prior to the
commencement of any foreclosure proceeding.

B. Any loss mitigation conducted pursuant to
Subsection A of this section shall include the participation of
a counselor certified by the federal department of housing and
urban development, if available, to assist the parties in
identifying options to be considered for returning the loan to
performing status or otherwise avoiding foreclosure.

C. The loss mitigation required pursuant to
Subsection A of this section shall afford the debtor an
opportunity to pursue a variety of alternatives to foreclosure,
consistent with the debtor's current financial circumstances
and willingness and ability to pursue such alternatives. These
alternatives to foreclosure may include:

(1) reinstatement of the loan and dismissal of
the foreclosure action upon the debtor's payment of applicable
fees and demonstration that the debtor can bring the loan
current;

(2) a repayment plan whereby the debtor agrees
to resume making monthly payments, plus a portion of the past
due payments each month, until the loan is brought current;

(3) a forbearance plan that may include one or
more of the following features:

(a) suspension or reduction of payments
for a period sufficient to allow the debtor to recover from the
cause of default;

(b) a period during which the debtor is
only required to make the regular monthly mortgage payment
before beginning to repay the arrearage;

(c) a repayment period of at least six
months; or

(d) allowing reasonable foreclosure
costs and late fees accrued prior to the execution of the
forbearance agreement to be included as part of the repayment
schedule;

(4) an extension agreement whereby the debtor
pays a portion of the amount of the total arrearage, and the
remaining portion of the arrearage amount is added to the end
of the loan;

(5) a loan modification plan that would
permanently change one or more terms of the defaulted loan
obligation, including:

(a) extending the amortization period of
the loan;

(b) converting an adjustable rate
mortgage into a fixed-rate mortgage;

(c) reducing the mortgage interest rate;
or

(d) adding missed payments to the
existing loan balance;

(6) a reasonable refinancing period of no
fewer than sixty days during which the lender agrees not to
pursue foreclosure and gives the debtor an opportunity to seek
refinancing of the loan obligation with a third-party lender;

(7) a principal reduction agreement in those
cases in which the debtor's loan obligation has a negative
amortization;

(8) a principal forbearance agreement;

(9) a mortgage loan assumption agreement
whereby a qualified third-party individual or entity can assume
the loan's payment obligation and the lender waives any
applicable "due on transfer" provision;

(10) an agreement by the debtor to execute a
deed in lieu of foreclosure in exchange for the lender
canceling the debt owed on the loan;

(11) a short sale; or

(12) a voluntary surrender of the home in
exchange for cash consideration.

D. The obligation to participate in loss mitigation
otherwise required pursuant to this section may be terminated
by the lender when the lender has pursued loss mitigation
efforts with the debtor and has determined, after a reasonable
period of time, that loss mitigation options are not feasible
in light of the totality of the circumstances.

(1) document all efforts to inform the debtor
and to evaluate loss mitigation opportunities; and

(2) within ten days of terminating loss
mitigation, provide to the debtor a written statement setting
forth the reasons for the alleged non-feasibility of loss
mitigation efforts.

Section 9. SETTLEMENT CONFERENCE--MEDIATION--PROCEDURE.--

A. In the initial pleading filed by a lender, the
lender shall certify that it has complied with Section 8 of the
Mortgage Fair Foreclosure Act and specify the actions taken to
comply with those obligations prior to the filing of the
action.

B. At any time after the filing of any responsive
pleading, the court may on its own motion or for good cause
shown, enter an order directing the parties to participate in
alternative dispute resolution as provided in Subsection C of
this section.

C. An alternative dispute resolution process shall

be conducted at no direct or collateral cost to the debtor.
All parties shall be required to participate, and a designated
representative of each party with final decision-making
authority shall participate. The alternative dispute
resolution process may include:

(1) loss mitigation through a loss mitigation
agency certified by the federal department of housing and urban
development;

(2) a court-supervised settlement conference,
a settlement conference with a court-appointed special master
or a court-annexed mediation process; or

Section 10. VIOLATIONS--SANCTIONS.--If a court finds that
either party failed to negotiate in good faith during loss
mitigation or alternative dispute resolution, or that there has
been a material violation of any provision of the Mortgage Fair
Foreclosure Act by the lender, the court may in its discretion
dismiss the action, award sanctions or assess attorney fees and
costs.

Section 11. DEFICIENCY JUDGMENTS.--

A. The court may, in the exercise of its discretion
and for good cause shown, limit or altogether prohibit the
availability of any deficiency judgment against a debtor who
has occupied the real property that is the subject of the
purchase-money mortgage obligation as the debtor's primary
residence, provided that the debtor has occupied the home as
the debtor's primary residence for no fewer than one hundred
twenty days prior to the initiation of the foreclosure action.

B. The court may find good cause for limiting or
prohibiting the availability of a deficiency judgment against a
qualifying debtor pursuant to Subsection A of this section.
Good cause may include a finding:

(1) that the debtor was locked into a
predatory mortgage product or other nontraditional mortgage
loan obligation; or

(2) that the debtor's financial circumstances
are such that the debtor is not reasonably capable of
satisfying a deficiency judgment.

Section 12. SEVERABILITY.--If any part or application of
the Mortgage Fair Foreclosure Act is held invalid, the
remainder or its application to other situations or persons
shall not be affected.

Section 13. APPLICABILITY.--The provisions of this act
apply to an action to foreclose on a mortgage, including any
required notice, taken on or after July 1, 2009.

Section 14. EFFECTIVE DATE.--The effective date of the
provisions of this act is July 1, 2009.